Access to Pre-Solicitation Information without Mitigation Plan: A Recipe for Rescission

Construction and Procurement Law News, Q2 2015

Client Alert

The Court of Federal Claims (“CFC”) recently made clear that mere access to pre-solicitation information creates a potential Organizational Conflict of Interest (“OCI”) that can invalidate an award. In Monterey Consultants, Inc. v. U.S. and Loch Harbour Group, Inc., the CFC upheld the rescission of a Department of Veterans Affairs (“VA”) task order award based on a contractor’s possible access to pre-solicitation documents.

The potential OCI arose in 2013, when the VA awarded Monterey Consultants, Inc. (“Monterey”) a blanket purchase agreement (“BPA”) to perform processing and verification services for the VA’s Center for Verification and Evaluation (“CVE”) and the Office of Small and Disadvantaged Business Utilization (“OSDBU”). After the BPA expired, the VA replaced some of the BPA services with two task orders: the subjects of the underlying bid protest in Monterey. The Request for Quotes (“RFQ”) for the task orders sought “administrative, paralegal, project management, and professional support” services in support of the CVE’s verification processing.

In compliance with Federal Acquisition Regulations (“FAR”) – which require Contracting Officers to preclude OCIs before award – the RFQ identified as a presumed OCI, and provided for the ineligibility of, contractors who were performing on other contracts in support of verification. In addition, offerors were required not to participate in an acquisition if 1) the contractor participated in the analysis and recommendation leading to the acquisition decision to acquire such services; or 2) the contractor may have an unfair competitive advantage resulting from information gained during performance of the contract. If an OCI was possible, the bidder was required to disclose the OCI and present a mitigation plan.

Despite the forgoing requirements, Monterey bid on the task orders without disclosing an OCI, and the VA awarded it the contract. Loch Harbour Group, Inc. (“Loch Harbour”) filed a bid protest and, after the Contracting Officer’s investigation, the VA rescinded the award.

The CFC deferred to the Contracting Officer’s findings, emphasizing Monterey’s access to solicitation documents, lack of disclosure, and lack of a mitigation plan. Regarding the solicitation documents, employees of Monterey and its subcontractor (CACI) had access to, and worked with, solicitation documents, including the requirements, independent government cost estimates, acquisition plan, market research, and evaluation criteria. To the CFC, “the problem [was] clear: prior to public availability, Monterey had access to information that could give it a competitive edge in crafting its proposal for the follow-on procurement. The CFC distinguished a prior case, IBM Corp. v. U.S., where the CFC declined to find an OCI, because in that case, the employee’s access to proprietary competitive information was speculative, and the information was three years old and stale by the time of the solicitation in question.

In addition, the Contracting Officer found with respect to Monterey that there was an actual OCI because a subcontractor employee working under the BPA was involved with Monterey’s proposal in response to a similar solicitation for work in support of the OSDBU.

“Compounding” the clear OCI was the fact that Monterey did not have a mitigation plan, in violation of the FAR and the RFQ. The court emphasized that nondisclosure agreements were not, by themselves, sufficient. While Monterey offers little guidance on what a sufficient plan would look like, it is likely that a firewall would have been a starting point. Note that while a firewall is a good starting point for access-to-information issues, contractors should take care to craft a plan that is tailored to specifically resolve the nature of the OCI – for example, a firewall would have little value if the OCI involved potential bias.

Here, it is unclear whether a robust mitigation plan would have saved Monterey. In recent cases, the CFC has taken a strict stance on mitigation plans, even when it requires the challenging of a Contracting Officer’s administration of such a plan. This case serves as a reminder that access to competitive information – regardless of whether that information is proprietary – should be treated as a potential OCI and trigger a mitigation plan if your company is bidding or proposing on a federal contract.